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What Is Disruptive Innovation?by Clayton M. Christensen, Michael E. Raynor, and Rory McDonald
FROM THE DECEMBER 2015 ISSUE
The theory of disruptive innovation, introduced in these pages in 1995, has proved to be apowerful way of thinking about innovation-driven growth. Many leaders of small,entrepreneurial companies praise it as their guiding star; so do many executives at large,well-established organizations, including Intel, Southern New Hampshire University, and
Unfortunately, disruption theory is in danger of becoming a victim of its own success. Despite broad
dissemination, the theorys core concepts have been widely misunderstood and its basic tenets
frequently misapplied. Furthermore, essential refinements in the theory over the past 20 years
appear to have been overshadowed by the popularity of the initial formulation. As a result, the
theory is sometimes criticized for shortcomings that have already been addressed.
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The Ubiquitous Disruptive InnovationDISRUPTIVE INNOVATION VISUAL by Clayton M. Christensen ,Michael E. Raynor , and Rory McDonald
Theres another troubling concern: In our experience, too many people who speak of disruption
have not read a serious book or article on the subject. Too frequently, they use the term loosely to
invoke the concept of innovation in support of whatever it is they wish to do. Many researchers,
writers, and consultants use disruptive innovation to describe any situation in which an industry
is shaken up and previously successful incumbents stumble. But thats much too broad a usage.
The problem with conflating a disruptive
innovation with any breakthrough that changes
an industrys competitive patterns is that
different types of innovation require different
strategic approaches. To put it another way, the
lessons weve learned about succeeding as a
disruptive innovator (or defending against a
disruptive challenger) will not apply to every
company in a shifting market. If we get sloppy
with our labels or fail to integrate insights from
subsequent research and experience into the
original theory, then managers may end up using
the wrong tools for their context, reducing their chances of success. Over time, the theorys
usefulness will be undermined.
This article is part of an effort to capture the state of the art. We begin by exploring the basic tenets
of disruptive innovation and examining whether they apply to Uber. Then we point out some
common pitfalls in the theorys application, how these arise, and why correctly using the theory
matters. We go on to trace major turning points in the evolution of our thinking and make the case
that what we have learned allows us to more accurately predict which businesses will grow.
First, a quick recap of the idea: Disruption describes a process whereby a smaller company with
fewer resources is able to successfully challenge established incumbent businesses. Specifically, as
incumbents focus on improving their products and services for their most demanding (and usually
most profitable) customers, they exceed the needs of some segments and ignore the needs of others.
Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a
foothold by delivering more-suitable functionalityfrequently at a lower price. Incumbents, chasing
higher profitability in more-demanding segments, tend not to respond vigorously. Entrants then
move upmarket, delivering the performance that incumbents mainstream customers require, while
preserving the advantages that drove their early success. When mainstream customers start
adopting the entrants offerings in volume, disruption has occurred.
Find this and other HBR graphics in our VISUAL LIBRARY
Is Uber a Disruptive Innovation?
Lets consider Uber, the much-feted transportation company whose mobile application connects
consumers who need rides with drivers who are willing to provide them. Founded in 2009, the
company has enjoyed fantastic growth (it operates in hundreds of cities in 60 countries and is still
expanding). It has reported tremendous financial success (the most recent funding round implies an
enterprise value in the vicinity of $50 billion). And it has spawned a slew of imitators (other start-
ups are trying to emulate its market-making business model). Uber is clearly transforming the taxi
business in the United States. But is it disrupting the taxi business?
According to the theory, the answer is no. Ubers financial and strategic achievements do not qualify
the company as genuinely disruptivealthough the company is almost always described that way.
Here are two reasons why the label doesnt fit.
Disruptive innovations originate in low-end or new-market footholds.
Disruptive innovations are made possible because they get started in two types of markets that
incumbents overlook. Low-end footholds exist because incumbents typically try to provide their
most profitable and demanding customers with ever-improving products and services, and they pay
less attention to less-demanding customers. In fact, incumbents offerings often overshoot the
performance requirements of the latter. This opens the door to a disrupter focused (at first) on
providing those low-end customers with a good enough product.
In the case of new-market footholds, disrupters create a market where none existed. Put simply, they
find a way to turn nonconsumers into consumers. For example, in the early days of photocopying
technology, Xerox targeted large corporations and charged high prices in order to provide the
performance that those customers required. School librarians, bowling-league operators, and other
small customers, priced out of the market, made do with carbon paper or mimeograph machines.
Then in the late 1970s, new challengers introduced personal copiers, offering an affordable solution
to individuals and small organizationsand a new market was created. From this relatively modest
beginning, personal photocopier makers gradually built a major position in the mainstream
photocopier market that Xerox valued.
A disruptive innovation, by definition, starts from one of those two footholds. But Uber did not
originate in either one. It is difficult to claim that the company found a low-end opportunity: That
would have meant taxi service providers had overshot the needs of a material number of customers
by making cabs too plentiful, too easy to use, and too clean. Neither did Uber primarily target
nonconsumerspeople who found the existing alternatives so expensive or inconvenient that they
took public transit or drove themselves instead: Uber was launched in San Francisco (a well-served
taxi market), and Ubers customers were generally people already in the habit of hiring rides.
Uber has quite arguably been increasing total demandthats what happens when you develop a
better, less-expensive solution to a widespread customer need. But disrupters start by appealing to
low-end or unserved consumers and then migrate to the mainstream market. Uber has gone in
exactly the opposite direction: building a position in the mainstream market first and subsequently
appealing to historically overlooked segments.
Disruptive innovations dont catch on with mainstream customers until qualitycatches up to their standards.
Disruption theory differentiates disruptive innovations from what are called sustaining
innovations. The latter make good products better in the eyes of an incumbents existing
customers: the fifth blade in a razor, the clearer TV picture, better mobile phone reception. These
improvements can be incremental advances or major breakthroughs, but they all enable firms to sell
more products to their most profitable customers.
Disruptive innovations, on the other hand, are initially considered inferior by most of an
incumbents customers. Typically, customers are not willing to switch to the new offering merely
because it is less expensive. Instead, they wait until its quality rises enough to satisfy them. Once
thats happened, they adopt the new product and happily accept its lower price. (This is how
disruption drives prices down in a market.)
Most of the elements of Ubers strategy seem to be sustaining innovations. Ubers service has rarely
been described as inferior to existing taxis; in fact, many would say it is better. Booking a ride
requires just a few taps on a smartphone; payment is cashless and convenient; and passengers can
rate their rides afterward, which helps ensure high standards. Furthermore, Uber delivers service
reliably and punctually, and its pricing is usually competitive with (or lower than) that of established
taxi services. And as is typical when incumbents face threats from sustaining innovations, many of
the taxi companies are motivated to respond. They are deploying competitive technologies, such as
hailing apps, and contest